With Peter Navarro, A Trump Tsunami on Trade Awaits China

By Leonard Novarro

If Beijing was upset about President-elect Donald Trump taking a call from Taiwanese president Tsai Ing-wen, it should be apoplectic about his appointment of former San Diegan Peter Navarro to oversee trade in the new administration.

“Brutal,” “parasitic” and “ruthless” are some of the epithets he has hurled at the country he blames for flooding the American market with illegally subsidized and “contaminated, defective and cancerous” exports, resulting in the disappearance of 57,000 American factories.

A hawkish critic of U.S.-China relations — not only in trade — Navarro will head the newly created White House National Trade Council. A UC Irvine economics professor who ran for office in San Diego some years ago, Navarro wrote the book “Death by China,” which he turned into a documentary, and “The Coming China Wars.” Both are ardently critical of China’s trade relations with the U.S. as well as its military buildup and sabre rattling over control of the South China Sea, a major trade route.

In the past, Navarro has made it clear that his target is not the Chinese people, but the Chinese government, for practices that have, in his opinion, killed U.S. manufacturing.

Almost 5 million jobs have been lost to China and Mexico, as well as Taiwan, South Korea and other Asian countries in the last 15 years. Hard manufactured products such as coffee makers, toys and clothing are not the only thing imported from China. Food packaged in supermarkets also comes from there, as well as varieties of fish. Salmon caught in the Northwest U.S., for example, is also shipped to China, packaged and sent back to the U.S. for purchase — a practice that has long mystified critics of U.S. trade policy.

Navarro has also criticized large American corporations and government lobbyists for supporting outsourcing to China. “China practices a perverse form of capitalism that undermines the U.S. economy by working hand in hand with U.S. corporations against America’s long-term interests,” he has said, singling out San Diego County officials who routinely sponsor foreign junkets to China on behalf of businesses seeking to relocate or do business there.

Container ships at the port of Los Angeles. Courtesy of the port

The San Diego Regional Economic Development Corporation, the biotech group BIOCOM and the Hong Kong Association have participated in these trips and outreach efforts. BIOCOM has said its China initiative “resulted in the establishment of several key relationships between BIOCOM and major life sciences entities in China.”

The Hong Kong Association in Los Angeles, an American-based business group, not too long ago brought together major U.S. technology firms and representatives of the Chinese government to “explore the opportunities presented by the burgeoning startup scene in Hong Kong.”

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And only a week after the presidential election, Qualcomm of San Diego announced a joint venture with China-based Tencent, a video game company, through its own China-based subsidiary, Qualcomm Wireless Communications Technologies (China) Ltd. QUALCOMM in May also announced it will make computer chips next year through a Chinese-owned government venture.

According to media critics such as the San Diego Reader, Qualcomm, while laying off ten percent of its work force two years ago, campaigned to raise the limit on H-1B visas so it could employ more foreign workers. “Study after study has shown that highly skilled immigrants create jobs and boost wages in the communities around where they work. In order to be competitive, the U.S. needs to take steps to bring its immigration laws in line with our innovation-based global economy,” said one request from the company.

All This Will Likely Change

Proponents of a tougher trade policy have been warned that China will strike back by tightening its reins on foreign investments. Indeed, on Friday General Motors’ joint venture in China was fined $29 million on charges it suppressed competition. Chinese regulators, in the past, have punished or leveled fines against foreign companies in an effort to drive down consumer prices, or to thwart direct competition with Chinese-owned companies. Qualcomm, ironically, for all the business it does there, has been one of those targets.

Opponents of outsourcing argue that by the time the costs of transportation, fuel and legal representation required to do business in China and other countries are factored into the cost of production, the overall savings from using cheap labor overseas is dramatically reduced. Trade hawks such as Navarro say a revised corporate tax structure benefitting companies that stay in America while penalizing those who don’t, could further offset the cost of relocating. That was one of the pledges President-elect Trump campaigned on.

“I think we’re headed into a very transactional period in the relationship [with China], and that’s not necessarily a bad thing,” Charles Freeman III, managing director at Bower Group Asia and former assistant U.S. trade representative for China affairs, told the Guardian newspaper.

“This situation is out of balance and needs to be corrected,” added Orville Schell, director of the Center on U.S.-China Relations at the Asia Society in New York. “I know [Navarro]. I’ve gone to events with him. He’s not a crazy person. He does believe there’s something deeply imbalanced.” Schell was also interviewed by the Guardian.

Critics of tougher trade practices with China see targets for outsourcing changing as well, with countries like Vietnam, Brunei and Malaysia becoming more attractive as Chinese wages grow. One San Diego newsletter, for example, bills itself as “a premium provider of all things relevant to business and investment in Vietnam, a country of enormous opportunities.” The government of Vietnam, like China, is controlled by the communist party.

While much of the outcry has been over the loss of U.S. manufacturing jobs, the service sector has also experienced an outflow of jobs to India and the Philippines. Remember the TV comedy “Outsourced” from a couple of years ago? According to critics of relocating business and services overseas, it’s not a laughing matter anymore.